March 11, 2020 / 4:43 PM / 23 days ago

Mexico car production at risk as coronavirus hits Chinese suppliers: officials

MEXICO CITY (Reuters) - Some of Mexico’s auto factories may have to suspend production in the coming weeks as the coronavirus outbreak disrupts shipments of key parts from China, according to local officials, in what would be another blow to the stagnant Mexican economy.

Manuel Gonzalez, economic development minister for Aguascalientes, one of a dozen Mexican states that have car factories, said some manufacturers had already told him they were running low on parts.

“I’ve been in contact with some important companies: They tell me that they have inventory through the second or third week of March,” Gonzalez told Reuters. “If that supply is not normalized, we will probably see firms suspending production.”

The fast-spreading coronavirus outbreak has rippled through the global economy and upended supply chains. More than 119,100 people have been infected by disease and 4,298 have died, the vast majority in China, according to a Reuters tally.

Late on Tuesday, the Mexican unit of German carmaker Volkswagen (VOWG_p.DE) said it had isolated in hospital an external trainer suspected of carrying the virus who recently visited its plant in the central city of Puebla.

If automakers had to suspend production, it would not bode well for President Andres Manuel Lopez Obrador’s plans to lift Latin America’s second-largest economy out of a mild recession.

Carmaking is a pillar of Mexican manufacturing and accounts for nearly 3% of gross domestic product. According to the International Organization of Motor Vehicle Manufacturers, Mexico is the world’s seventh-biggest car producer.

Nearly 80% of Mexican-made vehicles are shipped to its top trade partner, the United States.

Aguascalientes, a hub of car manufacturing in central Mexico, is home to two plants owned by Nissan Motor Co (7201.T), one by Mercedes-Benz, and a Daimler (DAIGn.DE) and Renault-Nissan Alliance joint-venture complex.

Operations in Aguascalientes are running normally, said a spokeswoman for Daimler AG, Mercedes-Benz’s parent.

Nissan has started sending parts by plane to its Mexican plants instead of by ship, despite an increase in cost, to avoid any setbacks to production, said Nissan Mexico corporate communications director Luciana Herrmann.

“We’re monitoring the situation and we have not confirmed any significant impact,” said Herrmann, adding there was no information of an impending production stoppage.

Cuitlahuac Perez, head of Aguascalientes’ automotive cluster, which promotes the industry, said Nissan executives have said their plants only have inventory for the next three weeks due to problems with supplies from China.

“If the shipment of components is not normalized in the next three weeks, then in more or less a month they’re going to begin suspending production here in Aguascalientes,” said Perez.

He added that he had also heard of similar supply problems in other car manufacturing hubs such as the states of Guanajuato in central Mexico and Chihuahua in the north.

Mauricio Usabiaga, Guanajuato’s economic development minister, said he had not received news of a hit to carmakers there. Chihuahua’s government did not respond to a request for comment.

A spokesman for General Motors Co (GM.N), which has a plant in Silao, Guanajuato, said the company was operating normally.

Ford Motor Co (F.N), which has plants in the states of Sonora and Chihuahua, provided no immediate comment.

The man isolated by Volkswagen in a Puebla hospital is based in Germany and came to Mexico after a recent vacation in Italy, the company said in a statement.

Volkswagen said it had asked the 40 people who had training with the man and their families to stay at home and to help identify who they had been in contact with afterwards.

Problems with parts supply is already having an impact elsewhere in Latin America. Brazilian automakers’ association Anfavea has warned its carmakers might have to halt production in April due to a lack of parts from China.

Reporting by Anthony Esposito; Additional reporting by Dave Graham and Lizbeth Diaz; Editing by Daniel Flynn, Jonathan Oatis and Marguerita Choy

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